USD: Hawkish repricing keeps dollar near cycle highs
The US dollar remains close to its strongest level in over a year, with the dollar index poised to close the week decisively above its 200-week moving average. That threshold has capped the index since the tariff-driven selloff in April 2025, making a sustained break technically significant.
The fundamental backdrop remains supportive. Fed pricing has turned sharply more hawkish following the latest inflation surprise and forceful commentary from policymakers. Austan Goolsbee described the report as “borderline disturbing”, while Christopher Waller opened the door to a potential 50bp move in December. Markets still attach a low probability to such an outcome, though they now price around 77bp of tightening over the next five meetings, almost double the 39bp expected a week ago.
US exceptionalism is also regaining traction. Concerns following the Democratic midterm sweep have faded somewhat, with tech stocks rebounding sharply. This is likely helped by strong reported demand for Anthropic’s IPO and renewed confidence in the AI investment cycle. A rebound in oil prices over the last day or so has also supported, though the energy tailwind is losing ground with brent down 20% month-to-date.
The dominant force remains the Fed and its impact on yields. The 10-year Treasury yield surged from 4.85% to 5% in a single session, reinforcing the sense that bond rallies remain vulnerable to renewed selling. Short-dated yields rose even further, flattening the 2-10 year curve, which is traditionally dollar supportive.
Friday’s October PPI report is the next test. Another hot inflation print would validate the hawkish repricing and keep the dollar buoyed near one year highs.
EUR: Key support gives way
The euro’s week has shifted decisively from attempted recovery to renewed downside pressure. EUR/USD initially benefited from improving risk sentiment and lower oil prices, but Tuesday’s hotter US CPI print, following an already strong payrolls report, reinforced Fed hiking expectations and put US yields and the dollar firmly back in control.
The result is technically significant. EUR/USD has broken below 1.11 to its weakest level since May 2025, extending a run that has seen the pair fall in nine of the past ten weeks and lose more than 4.5%. Crucially, the break takes spot below the 1.1110–1.1115 support zone, where the 50% retracement of the March 2025–January 2026 rally converges with the 200-week moving average. With that floor breached, attention shifts to the psychological 1.10 handle, followed by the next major retracement around 1.0880.
Fundamentals offer little immediate relief. US data remain resilient and Fed expectations hawkish, while the euro continues to carry a sizeable domestic risk premium. French fiscal and political uncertainty remains unresolved, broader European political concerns linger, and Russia’s rejection of a Ukraine land swap has dampened hopes of near-term geopolitical progress.
The one brake on further declines is positioning. Euro shorts are already heavily stretched, increasing the risk of sharp short-covering rallies.
Still, the broader message is increasingly difficult to ignore: EUR/USD has lost an important technical floor just as relative rates and political risk are moving against it. Near-term rallies may therefore remain corrective rather than signal a durable change in trend.
GBP: GBP/USD at one-month low on revived Fed hawkishness
The UK economy grew at the fastest pace in two years in the three months to September, expanding by 0.7%, strengthening the resilient economy narrative that has underpinned the pound in recent months.
Gross Fixed Capital Formation stood out, trouncing the 0.7% estimate with a 1.7% increase. The print underscores that much of the economic momentum is tied to AI-related investment. September industrial production numbers also came in strong, with the y/y figure at 3.1% versus 2.8% expected. This was the strongest reading since the post-Covid-19 activity surge in 2021.
Gilts sold off moderately, while the pound was largely indifferent to the news. A lot is already priced into the hawkish BoE/bullish pound trajectory, setting the bar higher for more pronounced responses.
GBP/EUR has edged lower from the unbroken 1.20 level before finding support along the 21-day moving average near 1.1945, signalling that despite the loss of momentum, GBP buyers retain the upper hand. This morning’s data batch only strengthens the pound’s appeal.
Elsewhere, sterling weakened against the dollar, having hit a one-month low as hawkish Fed bets were revitalised following a hotter-than-expected inflation report earlier this week. GBP/USD has breached below 1.33, with 1.3250 and 1.32 the next two support levels to watch.
Market snapshot
Table: Currency trends, trading ranges & technical indicators
Key global risk events
Calendar: November 09-13
All times are in GMT
Have a question? [email protected]
*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.
